Smaller Businesses Get Big Bottom-Line Benefits from Sustainability

Smaller Businesses Get Big Bottom-Line Benefits from Sustainability

Small- and medium-sized enterprises are placing more emphasis on sustainability and its paying off on the bottom lines says their accountants.

Three international accounting bodies have released a comprehensive research report underlining the growing emphasis small- and medium-sized enterprises are placing on sustainability as it becomes increasingly crucial to business performance

It uses concrete examples to show how smaller companies can lead the market and become champions of sustainable practice. It also reveals how the finance function can play a central role in this process.

The report focuses on nine case studies -- three each from the U.K., U.S. and Canada -- showing smaller companies who are taking different approaches to the same core issues, all using sustainable practices to their advantage.

While compliance with regulatory requirements remains the most common driver of business sustainability, profitability and other strategic factors are increasingly significant.

A sustainable business is more robust and more efficient; it appeals to customers' changing values, strengthens relationships with suppliers and positions the brand as a good corporate citizen, notes the report. It can reduce the variable costs of running a business while driving profitability.

The report builds on a joint survey completed at the end of last year. The survey by the three accounting bodies revealed that 33 percent of smaller companies involved had a sustainability strategy in place, and an additional 23% had plans to formulate a strategy in the next two years, emphasizing that sustainability is a growing priority.

Sandra Rapacioli, Head of Sustainability at CIMA, said: "We are seeing a shift in culture. SMEs are looking past survival and recognizing that successful sustainability performance translates to long-term success. Many are maximizing sustainability practices by also linking them to short-term goals, such as cost efficiencyand competitor differentiation."

"One leading U.K. stationery and business supplies provider is a great example. Initially skeptical, the company has not only reduced energy costs by an average of 5% year-on-year for the last four years, but has also increased sales and profits by differentiating itself as a sustainable supplier."

Sue Coffey, AICPA Senior Vice President, Public Practice and Global Alliance, said: "One of the lessons from the case studies is that finance professionals often play a key role in defining and guiding sustainability strategies, in part because they are used to navigating different parts of a business and keeping an eye on the big picture. It's one more example of the value the finance function can bring to an organization."

By "walking the talk," one U.S. midsize bank has reduced its power consumption by 40 percent with a solar installation, while maintaining a profitable business model making commercially viable loans to customers financing renewable and energy-efficient projects.

"Collaborative studies provide a valuable snapshot of what is happening across several jurisdictions," stressed Nicholas Cheung, National Practice Area Leader for Sustainability at CICA.

"SMEs are interesting to study because they usually have more agility than large multinationals to make meaningful change and clearly demonstrate the benefits that come with sustainable business practices."

A multifaceted Canadian food company profiled in the publication maintains that sustainability is beneficial as people are looking for companies that are doing something positive.

The company makes a profit, but it also goes into schools to teach children about growing food and making healthy snacks, sources 90% of its produce locally, consults with urban gardeners and funds community projects.

The company notes that people are less tolerant of operations just seeking to maximize profit, and are looking for enterprises that are environmentally and socially aware.

In many SMEs, finance professionals play a critical role in formulating and implementing a sustainability strategy. They have the skills and tools required to define the metrics that determine the effort's goals and progress, and help foster the vital link between investment in the strategy and the commercial benefit that accrues.